Skip to main content

Millions or Crores in P&L and Balance Sheet

You will most often hear about any MNC - "It is 7 billion US dollar company". Then you tend to make a comparison of turnover based on millions and billions rather than crores or lakhs. I was looking at financial statements of TCS, Satyam & Wipro - the top three Indian IT companies.
  • TCS financial statements is in Indian Rupees and reported the amounts in crores.
  • Wipro's financial statement is in Indian Rupees and reported in millions. The consolidated statements in US GAAP is Indian Rupees with translations in US Dollars. The press release statement reports in Indian rupees with translations in US Dollars
  • Satyam financial statements are in Indian rupees and reported in 'crores. The US Gaap statements are reported in USD and in millions.

You may read the statements from the reader's point of view:

Investor in India :

When a reader has to compare statements of TCS & Wipro, he has to convert either Satyam statement into millions or TCS into crores. Otherwise he cannot make a suitable conclusion. In India, it is a general practise that amounts are reported in lakhs/crores.

Foreign Investor:

In business world, since the US dollar is dominant, he may ask his accountant to translate the financial statements in USD. Secondly, if the financial statements are in crores, then then it has to be made in millions. Then he would be able to make out sense in financial statements.

I don't think there is any Accounting Standards in India on the amounts are to be reported in millions or lakhs or crores. But I am of the opinion that

  1. The financial statements in India should be prepared in millions. (I should do away with my habit of thinking in 'crores !!!)
  2. The companies with turnover of more than Rs 10,000 million should also prepare their Balance Sheet and P&L in USD as on currency translations on last date of balance sheet.

ICAI should issue Accounting Standard on pt. 1 with due consultation with the industry and other bodies. The objective of good reporting is also comparability of financial statements.

A couple of months back, I was talking to one of my friends in US and he said that TCS is much bigger than CSC. When I told him to translate the sales to USD, then compare and he was upto a surprise. TCS is $ 2.2 billion and CSC $ 14.1 billion.

And couple of years ago, we were dicussing that Tata Motors has taken over a company for Aus $ 10 million. He said it was a great achievement for TML. When you translate the amount in Indian Rupees it 25 crores. When TML invests 25 crores, it is peanuts to them !!!

One of key factors of financial statements is comparability. I think ICAI should come out with a standard of reporting the amounts just like we have a standard metric system.

Regards,

Santosh Puthran

AICWA

To remain updated on new posts of the blog...click on subscribe to the feed.

2 comments

Popular posts from this blog

Throughput Accounting

Throughput accounting (TA) is an alternative to cost accounting proposed by Eliyahu M. Goldratt. It is not based on Standard Costing or Activity Based Costing (ABC). Throughput Accounting is not costing and it does not allocate costs to products and services. It can be viewed as business intelligence for profit maximization. Conceptually throughput accounting seeks to increase the velocity at which products move through an organization by eliminiating bottlenecks within the organization.


Cost (or Management) accounting is an organization's internal method used to measure efficiency. Since no one outside the organization uses such internal accounts for investment or other decisions, any methods that an organization finds helpful can be used.


Throughput accounting improves profit performance with better management decisions by using measurements that more closely reflect the effect of decisions on three critical monetary variables (throughput, inventory, and operating expense — defin…

Learning Curve Theory

Learning Curve Theory is concerned with the idea that when a new job, process or activity commences for the first time it is likely that the workforce involved will not achieve maximum efficiency immediately. Repetition of the task is likely to make the people more confident and knowledgeable and will eventually result in a more efficient and rapid operation. Eventually the learning process will stop after continually repeating the job. As a consequence the time to complete a task will initially decline and then stabilise once efficient working is achieved. The cumulative average time per unit is assumed to decrease by a constant percentage every time that output doubles. Cumulative average time refers to the average time per unit for all units produced so far, from and including the first one made.

Major areas within management accounting where learning curve theory is likely to have consequences and suggest potential limitations of this theory.


Areas of consequence:
A Standard Costing

Resistence to Change - Approaches of Kotter and Schlesinger

The Six (6) Change Approaches of Kotter and Schlesinger is a model to prevent, decrease or minimize resistance to change in organizations.
According to Kotter and Schlesinger (1979), there are four reasons that certain people are resisting change: Parochial self-interest (some people are concerned with the implication of the change for themselves ad how it may effect their own interests, rather than considering the effects for the success of the business)Misunderstanding(communication problems; inadequate information)Low tolerance to change (certain people are very keen on security and stability in their work)Different assessments of the situation (some employees may disagree on the reasons for the change and on the advantages and disadvantages of the change process) Kotter and Schlesinger set out the following six (6) change approaches to deal with this resistance to change: Education and Communication - Where there is a lack…